10-Year Yield vs. Mortgage Rates
After a tight jobs week release, we head straight into CPI and PPI inflation week, along with the Fed meeting! One piece of good news I got from the Fed meeting that made me smile: Powell finally acknowledged that the labor market is no longer tight, which is a favorable statement for lower interest rates if labor data weakens. I discuss this issue in this episode of the HousingWire Daily podcast.
Inflation data was soft last week, but I think more attention needs to be paid to the weekly jobless claims data and the weekly employment data.
The 10-year Treasury yield closed last week at 4.22%.
mortgage spread
The spread between 30-year mortgage rates and 10-year yields has been an issue since 2022, and it got worse after the March 2023 banking crisis. However, spreads, while far from ordinary, have improved this year.
If we took the worst spread levels from 2023 and combined them to today, mortgage rates would be 0.52% higher. While our spreads are far from average, the improvement we’ve seen this year is a plus.
Purchase application data
Last week, we had the second-best weekly percentage of purchase applications due to the recent drop in mortgage rates. Now, I remind everyone that we are working from a shallow pole, so it doesn’t take much to move the needle. But if we can stretch it out a few weeks like this, you’ll get something.
Since mortgage rates began to fall in November 2023, we have had 13 positive prints, 13 negative prints and 2 flat prints each week. Once mortgage rates start rising in 2024, some of that demand is removed. As you can see below, the data so far in 2024 isn’t even positive: we have 7 positives, 13 negatives, and 2 flats. With rates this high, we’re not getting any real mortgage demand growth, and the rebound we’re seeing in the data is coming from depressed levels.
Weekly housing inventory data
As we head into summer, I still can’t thank you enough for the growth of this year’s inventory. If mortgage rates continue to fall and demand picks up, we will have a better active inventory buffer than we did in 2022 and 2023.
My rule of thumb is that as long as interest rates are above 7.25%, inventory should be printing between 11,000 -17,000 per week. We’ve achieved that goal three times this year; last year it was a staggering zero. While weekly inventory growth didn’t hit that level, Friday’s ratio declined and inventories grew at a healthy pace 8,943.
- Weekly inventory changes (June 7 to June 14): Inventory growth from 611,596 arrive 620,539
- Same week last year (June 9 to June 16): Inventories rise 443,749 arrive 451,808
- Historical inventory bottom occurs in 2022 240,194
- This week is peak 2024 inventories 620,539
- For some purposes, active listings this week in 2015 were 1,174 446
New listing data
Another positive news for 2024 is that new listings are increasing from 2023’s record low levels. The only thing about 2024 is that I’m 100% sure we’ll see a seasonal peak print run of at least 80,000 copies, but that doesn’t seem to be happening this year as the seasonal decline in new listings hasn’t happened. has happened. far away.
Here are the new slates from last week over the past few years:
- 2024 71,457
- 2023: 62,187
- 2022: 87,996
Price reduction percentage
On average, one in three homes loses price every year—standard housing activity. When mortgage rates rise, demand falls and the price reduction percentage increases. When interest rates fall and demand improves, the price reduction percentage may decrease. The data line is seasonal, and since the end of March we’ve seen continued year-over-year growth in markdown percentage.
As older, outdated data trickles in, we should see a slowdown in annual price growth. I recently discussed this on the HousingWire Daily podcast and explained why I believe this is the case. Here are last week’s price reduction percentages over the past few years:
- 2024: 36%
- 2023: 31%
- 2022: 27%
for sale
Below is our weekly open contract year-by-year data to give an immediate indication of demand. Our demand has increased this year as more sellers become buyers. If mortgage rates continue to move lower, this contract number will grow, but we haven’t seen mortgage demand grow yet.
- 2024: 395,960
- 2023: 386,052
- 2022: 452,003
The week ahead: Existing home sales, new housing starts, retail sales and Fed speeches
We’ll get some economic data this week; retail sales will be an important data line from the Fed. We will also get housing starts and it will be interesting to see if the downward trend in single-family and multi-family permits continues. Existing home sales are due out on Friday but should still be near recent lows. However, this week’s Fed presentation will touch on all the data we’ve collected
